Problem 5-10 Present and future values for different interest rates

Find the following values. Compounding/discounting occurs annually. Round your answers to the nearest cent.

1. An initial $400 compounded for 10 years at 10%.

   $

2. An initial $400 compounded for 10 years at 20%.

   $

3. The present value of $400 due in 10 year at a discount rate of 10%.

   $

4. The present value of $1,335 due in 10 years at 20%.

   $

5. The present value of $1,335 due in 10 years at 10%.

   $

6. Define present value.

   1. The present value is the value today of a sum of money to be received in the future and in general is less than the future value.
   2. The present value is the value today of a sum of money to be received in the future and in general is greater than the future value.
   3. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value.
   4. The present value is the value in the future of a sum of money to be received today and in general is less than the future value.
   5. The present value is the value in the future of a sum of money to be received today and in general is greater than the future value.

   Select I - V?

7. How are present values affected by interest rates?